Your Easy Guide To Medicare

How is Medicare affected by the House GOP health Plan?

We have been asking readers for questions about statements made at congressional town halls, and one reader directed us to a very contentious session held April 13 by Rep. Greg Walden (R-Ore.) in liberal-leaning Hood River, Ore. There are times when Walden’s answers could barely be heard over the hooting and hollering.

Some of the questions concerning the House Republicans’ replacement for Obamacare — the American Health Care Act — turned on local issues, but there were two statements of broad interest worth exploring in The Fact Checker. We’re not issuing Pinocchios, as Walden’s statements were defensible, but simply noting some of the fine print behind his remarks.

“Medicare and care of the elderly is not affected at all by this legislation.”

Medicare, the old-age health program, emerged largely unscathed from the proposed legislation — even the $700 billion in Medicare “cuts” that Republicans used to highlight in attack ads. Those spending reductions have been retained, for now.

But there are two provisions in the bill affecting the financing of Medicare that have received relatively little attention.

One, the proposal would eliminate a 0.9 percent Medicare payroll surtax that was aimed at high earners. This would reduce revenue to the Medicare Hospital Insurance (Part A) trust fund by $117 billion over 10 years, according to congressional tax analysts. The chief actuary of Medicare estimated that this would move up the expected date of the trust fund’s depletion from 2028 to 2025. After that date, benefits could be only partially financed unless Congress took action to raise revenue in other ways.

Second, the proposed law would limit the per capita growth of Medicaid, the health program for the poor, to the medical-care component of the consumer price index starting in 2020. But that could affect people who qualify for both Medicaid and Medicare. An analysis by Avalere Health, a health consulting firm, found that this could lead to a $44 billion spending cut for dual-eligible beneficiaries. That, in turn, could increase Medicare spending through higher rates of hospitalization and other services, further weakening the financial health of the program.

“House Republicans believe growing the economy and advancing common-sense, targeted reforms are the best ways to ensure the long-term sustainability of Medicare,” a spokesman for Walden said. “But keeping taxes that discourage work, limit innovation and stifle economic growth is not the answer. Again, no structural or eligibility changes are made to Medicare in the AHCA.”

“We have got to get the costs down. Our proposal, according to the independent experts we know, it will reduce premiums by 10 percent. We would actually bring costs down.”

The “independent experts” are the Congressional Budget Office. This is what the CBO said: “By 2026, average premiums for single policyholders in the nongroup market under the legislation would be roughly 10 percent lower than the estimates under current law.”

Note the phrase “current law.” That means CBO is measuring the effects of the AHCA vs. the Affordable Care Act. CBO is not saying that premiums are going down, just that they would be 10 percent lower than otherwise expected. So, for instance, if premiums were expected to rise an average of $5,000 over the next 10 years, they would rise instead by $4,500.

Moreover, CBO says the main reason for the average decrease is because premiums for older Americans would jump, while premiums for younger Americans would decline. That’s because the AHCA changes the age ratio in the law from 1:3 to 1:5, meaning older Americans can be charged five times as much as younger Americans.

By 2026, the CBO report said, “premiums in the nongroup market would be 20 percent to 25 percent lower for a 21-year-old and 8 percent to 10 percent lower for a 40-year-old — but 20 percent to 25 percent higher for a 64-year-old.”

The Walden spokesman responded: “The binary choice being discussed in an informal give and take was between the costs to consumers associated with the ACA and the AHCA. CBO clearly stated that premiums under the AHCA will be lower than under the ACA, which is consistent with Chairman Walden’s statement that the bill would bring costs down.”